Reinsurance News

Property underwriting improvements to continue through early 2020: Lockton

10th October 2019 - Author: Matt Sheehan

Analysts at global re/insurance brokerage Lockton expect the more discerning approach of underwriters in the US property market to continue through at least into early 2020, based on performance this year.

profitable-growth-reinsuranceLockton noted that there is still plenty of capital in the marketplace, but deployment is becoming tighter, leading to an ongoing uptick in premium pricing.

Commercial property rates were already beginning to tighten but have become much more significant following the catastrophe losses of 2017 and 2018.

Even clients with clean loss histories or benign risk profiles are experiencing increases of 5-10%, analysts observed, while certain segments and accounts with large cat losses are even higher.

Adding to this dynamic, new capacity has not emerged to counteract some of the firming this year, while underwriting terms have been tightened to focus on margin and return on capital.

In particular, the California earthquake market is starting to trend up, Lockton said, with average rate increases of 5% on clean accounts.

Aggregation issues are driving the pricing uplift, the broker explained, so buyers are looking to parametric solutions as an option.

Notably, the dealers open lot (DOL) market has seen average rate increases of around 15%, with some clients reporting hikes as high as 40-50%.

Similar to the US property market, global carriers are evaluating their deployment of capital in local markets, which is impacting pricing and capacity for global property programs.

Many insurers have isolated certain countries as underperforming and in some cases have elected to not renew or exit the market, Lockton noted.

Additionally, local insurers are seeking to improve their underwriting performance and reduce their exposure, so stand-alone local policies may be particularly vulnerable without the support and leverage of a broader global program.

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